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April 15, 2010

VALUATION WATCH: Our models find that overvaluation is approaching

levels typically seen when a market correction is imminent. Overvalued
stocks now make up almost 61% of our universe and 31% of the universe is
calculated to be overvalued by 20% or more. All sectors are now
calculated to be overvalued

There's No Place like Home?

ValuEngine Rates Homebuilder Hovnanian a Buy

ValuEngine has issued a BUY recommendation for HOVNANIAN ENTERPRISES INC

(HOV). Based on the information we have gathered and our resulting research, we feel that
HOVNANIAN ENTERPRISES INC has the probability to OUTPERFORM average market
performance for the next year. The company exhibits ATTRACTIVE market valuation,
price/sales ratio and momentum.

As the latest earnings report indicated, Hovnanian hasn't fully recovered from the
bursting of the housing bubble, but it is doing better than its industry group as a whole.
Recent changes to the tax code--which were part of the stimulus bill--modified write off rules
and allowed huge builders like Hovnanian to apply losses from 2008-2009 against taxes paid
for the previous five years--the old law only allowed write offs against the prior two years.
This has provided the company some much-needed breathing space--in the form of an
estimated $290 million rebate.. Yesterday, the stock jumped hard and provided a one day
gain of more than 10%.

However, it remains to be seen how the latest foreclosure news will effect the Home
Builders. HOV looks good to our models, but they cannot account for investor sentiment as
the market digests the news that the housing market is not out of the woods just yet.

Subscribers can check out the latest figures on HOV HERE.

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MARKET OVERVIEW
Summary of VE Stock Universe
Stocks Undervalued 39.03%
Stocks Overvalued 60.97%
Stocks Undervalued by 20% 18.84%
Stocks Overvalued by 20% 31.42%

SECTOR OVERVIEW

Last 12- P/E

Sector Change MTD YTD Valuation
MReturn Ratio
Basic Industries 1.43% 5.39% 18.28% 17.63% overvalued 96.68% 28.36
Capital Goods 1.71% 5.28% 17.58% 17.23% overvalued 69.40% 23.03
Consumer Durables 2.04% 5.56% 12.93% 20.52% overvalued 95.62% 24.5
Consumer Non-Durables 0.90% 3.50% 11.40% 8.72% overvalued 81.36% 19.76
Consumer Services 1.52% 6.01% 18.33% 10.64% overvalued 82.09% 24.15
Energy 1.51% 4.42% 6.42% 13.86% overvalued 74.84% 22
Finance 1.66% 4.12% 13.61% 11.18% overvalued 45.00% 19.64
Health Care 1.52% 4.12% 11.73% 3.16% overvalued 69.36% 22.35
Public Utilities 0.80% 1.73% 2.81% 5.78% overvalued 45.79% 16.59
Technology 1.95% 4.96% 13.06% 3.64% overvalued 78.04% 28.98
Transportation 2.03% 5.55% 14.38% 14.08% overvalued 69.33% 22.14